Biofuels — not a dirty word.

Even before this year’s fight over ethanol subsidies, biofuels had an image problem.

Once darlings of the alternative-energy crowd, biofuels in recent years took the blame for rising food prices. (Never mind that a 2009 study from the Congressional Budget Office said higher oil prices had a much bigger effect on food prices than corn-ethanol did.)These days, electric cars get all the love.

But biofuel research hasn’t died. Most biofuel startups now focus on using raw materials that humans don’t eat. And the federal government keeps funding them.

Case in point:

Earlier this week, a biofuel consortium picked Amyris in Emeryville as one of two companies that will receive federal funding to develop advanced “drop-in” fuels. Drop-ins are fuels that can either replace or supplement gasoline and diesel in existing engines.

Amyris’s secret weapon is yeast. The company uses re-engineered yeast to turn sugars into fuel. Amyris already produces and sells a hydrocarbon made from sugarcane, a hydrocarbon that can be turned into a kind of diesel or gasoline. Now, with government backing, the company will try to do the same with woody plants that aren’t used for food.

Carlos Avila Gonzalez, The Chronicle

Amyris CEO John Melo at the company’s Emeryville HQ.

The company was chosen by the National Advanced Biofuels Consortium, which is funded by the U.S. Department of Energy. The consortium examined six different biofuel technologies, gauged their potential, and chose two who will receive additional funding from the DOE. (The Department plans to spend about $26 million on the two winners, together, but the exact amount each company will receive has not yet been decided.) Now Amyris and the other winner, Virent, must show that their processes can churn out fuel in bulk.

“Both approaches, from a technology standpoint, will probably work,” said Joel Velasco, senior vice president for external relations at Amyris. “But one of the key things this consortium is trying to do is say, ‘Not only will this technology work in the lab, but you can do it at scale.'”

Although yeast usually can’t process the kind of sugar that comes from breaking down woody plants, Amyris has developed a type of yeast that can, Velasco said.

Despite all the attention currently going to the electric car, Velasco says biofuels have their place. Electric transportation may work fine in urban environments, but it has limitations.

“You’re going to need a liquid fuel for transportation in the air, and you’ll need it for long-range transportation,” he said. “I grew up in Brazil. You can go 100 miles without seeing a gas station.”